Resigning Employee Says Goldman Is "Just About Making Money"

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In a stinging op-ed piece in The New York Times, a former Goldman Sachs manager calls the company's culture "toxic and destructive" and says the company has lost its focus on clients. Greg Smith, former head of Goldman's U.S. equity derivatives business in Europe, the Middle East, and Africa, resigned from the firm as of today-and went out with a bang.

In some ways, the letter confirms the negative image of Goldman as too focused on profits:

"What are three quick ways to become a leader? a) Execute on the firm's 'axes,' which is Goldman-speak for persuading your clients to invest in the stocks or other products that we are trying to get rid of because they are not seen as having a lot of potential profit. b) 'Hunt Elephants.' In English: get your clients - some of whom are sophisticated, and some of whom aren't - to trade whatever will bring the biggest profit to Goldman. Call me old-fashioned, but I don't like selling my clients a product that is wrong for them. c) Find yourself sitting in a seat where your job is to trade any illiquid, opaque product with a three-letter acronym."

Smith also tallies recent image-damaging transgressions, with helpful links from The New York Times to related stories:

"It makes me ill how callously people talk about ripping their clients off. Over the last 12 months I have seen five different managing directors refer to their own clients as "muppets," sometimes over internal e-mail. Even after the S.E.C., Fabulous Fab, Abacus, God's work, Carl Levin, Vampire Squids? No humility? I mean, come on. Integrity? It is eroding. I don't know of any illegal behavior, but will people push the envelope and pitch lucrative and complicated products to clients even if they are not the simplest investments or the ones most directly aligned with the client's goals? Absolutely. Every day, in fact."

Goldman was quick to respond to the letter:

"We disagree with the views expressed, which we don't think reflect the way we run our business. In our view, we will only be successful if our clients are successful. This fundamental truth lies at the heart of how we conduct ourselves."

CEO Lloyd Blankfein and COO Gary Cohn also responded in an open letter to employees: 

"In a company of our size, it is not shocking that some people could feel disgruntled.  But that does not and should not represent our firm of more than 30,000 people. Everyone is entitled to his or her opinion.  But, it is unfortunate that an individual opinion about Goldman Sachs is amplified in a newspaper and speaks louder than the regular, detailed and intensive feedback you have provided the firm and independent, public surveys of workplace environments.

"While I expect you find the words you read today foreign from your own day-to-day experiences, we wanted to remind you what we, as a firm – individually and collectively – think about Goldman Sachs and our client-driven culture."

For another perspective, Jim Cramer, of  MSNBC, says the letter is "devastating" and "shocking." (Forward to 1:10.)

Update: Goldman Sachs lost $2.15 billion in market value following Smith's letter; the stock dropped 3.4%, the third largest decline in the company's history, according to Bloomberg.

Discussion Starters:

  • Read the entire op-ed letter by Greg Smith. What do you consider to be his strongest and weakest arguments?
  • Read Goldman Sachs' response. Same question: What do you consider to be the company's strongest and weakest arguments?
  • How, if at all, do you think the letter will affect Goldman's image?
  • Do you think that Goldman Sachs will change its business practices as a result of this letter?